China's Exports Face EU's "Double Counter" Threat

After the United States, the European Union may become another battleground for the implementation of "double opposition" to Chinese products, and the "countervailing" will become a new hot spot in China's foreign trade friction. In accordance with a reform plan under discussion within the European Union, the European Commission will have the right to initiate countervailing investigations in its own right in future, and no longer need to take corresponding actions after enterprises complain. The EU used to classify China as a "non market economy" to avoid compensatory tariffs, but this practice of not applying countervailing measures to "non market economies" is now loosening. Analysts point out that this means that while the EU continues to wave the "anti dumping" stick, it also intends to increase the intensity of "countervailing" and expand its scope of application. A two pronged European Union is likely to become another major trade battleground after China confronting the threat of "double opposition" after the US. The European Commission, backed by EU Trade Commissioner Peter Mendelson, recently suggested that the European Commission should be given the right to initiate countervailing investigations by itself. According to the EU's current Countervailing Rules, the European Commission can only "passively" decide whether to initiate countervailing investigations, and then impose countervailing duties on imported products that are found to be subsidized. The enterprises that lodged complaints must also represent 50% of the output of the EU related industries. The Financial Times quoted the European Commission's internal discussion paper as saying that this change is because if official investigation is initiated, it is not necessary to worry about the other party's retaliation due to the complaint. With the company's concerns, the EU obviously wants to use the countervailing trade remedy tool, which is directly involved in the dispute by the European Commission. An EU official close to Mandelson confirmed that there was such an internal discussion when Mandelson's proposal was positively responded. It is reported that at present, 12 EU member states explicitly agree to take more countervailing measures, and only 2 of them oppose it. The right to investigate the European Commission has also been supported by more than 10 member states. What is worth noting is that Mandelson also suggested that we should open a gap to the EU's principle of "non market economy" which is not applicable to countervailing measures, which will directly affect Chinese products. The reason why the EU does not apply countervailing measures to non market economies is that it is difficult to judge the degree of subsidy in these countries, so only anti-dumping and other trade remedy measures are adopted. However, Mandelson believes that countervailing measures can be applied to enterprises that have been granted market economy treatment in case of anti-dumping investigations, even if they come from non market economies, because the information of these enterprises is relatively sufficient to make judgments on the extent of subsidy. This means that the EU is likely to follow the steps of the United States to start countervailing against Chinese products and add barriers on the basis of anti-dumping. Last year, for the first time, the United States broke the long-term policy of countervailing against "non market economies", and launched 7 anti-dumping and countervailing investigations on China's export of American coated paper and standard steel pipes. At present, China has asked the US side to hold consultations on the case of coated paper in the WTO dispute settlement mechanism. Canada first launched a countervailing investigation on China's exports in 2004. While the developed countries have thrown aside the "non market economy" restrictions, more and more countries have recognized China's market economy status. Therefore, some experts predict that countervailing is likely to become a new hot spot in China's foreign trade friction. The new plan will see that next month, the EU is keen on countervailing, and there are deep reasons for it. The frequent use of anti-dumping measures is deepening the internal cracks in the European Union. Whether it is the Chinese leather shoes case in 2006 or this year's China energy saving light bulb case, the EU's anti dumping decisions have divided the member states into two parties. European Union officials close to Mandelson have said that most EU member states are reluctant to use anti-dumping measures too much. Behind the EU's internal differences is conflict of interest, because anti-dumping duties on cheap imports hurt the interests of EU importers and consumers and protect a small number of local producers. Because European companies outsource production, anti-dumping often hurts the EU itself. Compared with anti-dumping, countervailing can save some worries. After all, foreign government subsidies will only give "pure" domestic enterprises and rarely outsiders. Countervailing targets are directly directed towards foreign governments, because subsidies are generally regarded as government actions, and the nature of trade frictions is not simply the behavior of enterprises. After nearly a year of deliberation and delays, the European Commission is scheduled to announce to the outside world its reform plan of trade remedy tools such as anti-dumping and Countervailing Measures on 5 December. It will be clear how to change faces. Stuart Newman, spokesman for foreign trade association, which represents the interests of European importers and retailers, said in November 16th that he hoped that the overall situation of Sino EU economic and trade relations would remain unchanged no matter how it changed.